IMF and European Commission Supported the Government's Position on Tobacco Stick Taxation.

The International Monetary Fund and the European Commission support different tax rates on cigarettes and heated tobacco sticks in Ukraine

The International Monetary Fund and the European Commission agree on the need to establish different tax rates on cigarettes and heated tobacco sticks in Ukraine, as stipulated in the government's draft law No. 11090. The European Commission stated in its report and the International Monetary Fund in a letter to the Ministry of Finance expressed their agreement with this.

'Regarding excise duties on tobacco products, the Tax Code of Ukraine is generally aligned with EU legislation. Further alignment is needed for different categories of tobacco products and the excise tax rates applied in accordance with EU norms,' the European Commission's report states.

The IMF noted that the differentiated approach to taxing cigarettes and tobacco sticks proposed by the Ministry of Finance is in line with the Fund's recommendations.

'For tobacco products for electric heating, we proposed a rate based on a comparable tobacco base for these products, recommending a rate between 45 and 90 euros per 1000 tobacco sticks, while noting the need to find a balance between financial goals and health objectives. The rate proposed by you (by the Ministry of Finance - ed.) of 72 euros per 1000 sticks in 2028 falls within this range,' the IMF's position in the letter to the Ministry of Finance of Ukraine states.

In the EU, the minimum tax rate on cigarettes is 90 euros per thousand pieces, while the tax rate for THP is significantly lower (from 45 euros per 1000 pieces), due to the possibility of encouraging smokers to switch to smoke-free alternatives.

The draft law provides for the conversion of excise tax rates on tobacco products to euros; the continuation of the current excise tax schedule until 2028 aimed at achieving the minimum level in the EU (90 euros for 1000 cigarettes) and the implementation of European practices regarding the differentiation of excise tax rates between THP and cigarettes.